Find the Right Buyer for Your Client's Business
Source: AICPA CPA Insider
The following includes excerpts, reproduced with permission, from an article by Heidi Bolger.
Do you have clients who are thinking about closing their businesses and are looking for advice on succession planning and how to find the right buyer? Your clients may have the perfect buyer-candidate right under their noses.
Key employees are very knowledgeable about what it takes to operate certain aspects of the business successfully and can be high-potential entrepreneurs-in-waiting. So why not consider these key employees as potential buyers?
Pros and Cons of Selling to Key Employees
Reasons your client should consider selling to key employees:
- Key employees' abilities have been tested and proven.
- Customers already know these individuals.
- No outside search process or business broker is required.
- Key employee ownership may provide the seller a greater opportunity to stay involved in an acceptable role post-sale.
- Clients gain the gratification and gratitude that comes from rewarding key employees the privilege of ownership.
Some of the potentially bad reasons or outcomes from a sale to key employees:
- Dealing with unsophisticated buyer(s) may require a lot of hand-holding.
- Selling to key employees may or may not optimize your client's selling price.
- Outside buyers may be more seasoned in running and growing your client's business.
- Negotiating with people you know well and care deeply about can be very challenging.
- It might offend other employees who don't get offered the opportunity to purchase the business.
- Having a key employee step into an owner role can disrupt the chemistry of your client's team.
- Key employees often lack personal resources required to purchase the business.
- It can be challenging to sell to key employees in a tax-efficient manner.
For the complete article, read “Are Your Clients Closing Shop in 2012?”
From AICPA CPA Insider, January 9, 2012, www.CPA2biz.com.